Consider an annual coupon bond with a face value of $100, 15 years to maturity, and...
Consider an annual coupon bond with a face value of $100, 15 years to maturity, and a price of $94. The coupon rate on the bond is 2%.
If you can reinvest coupons at a rate of 5% per annum, then how much money do you have if you hold the bond to maturity?
The total proceeds from holding the bond to maturity are
$nothing.
(Round to the nearest cent.)
Homework Answers
Total proceedings = Face value + Earnings
We have calculate earnings by using FV function in excel formula.
Rate = 5%
Nper = 15
Pmt = 100*2% = $2
PV = 0
Earnings = FV(rate,nper,pmt,PV,type)
=FV(5%,15,2,0,0)
=$43.16
Therefore earnings = $ 43.16
Total Proceedings = $100 + $43.16 = $146.16
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